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Mutual Funds

National Donut Day comes around faster and faster every year. Wait…that’s my refrain for New Year’s.

In the interest of doing a timely piece though, let’s see if I can turn National Donut Day into a financial lesson of sorts.

A box of donuts is kind of like a mutual fund. Think of a single donut as a company. If you buy just one donut, and something happens to it, then you’re done. Kind of like buying just one company’s stock. If something happens to that single company, well, there goes your investment.

It’s kind of like the family swear jar. The thing that sits on the kitchen counter and gets stuffed with money every time someone gets caught sounding like Stephen Colbert talking about the President. Multiple family members are usually feeding the jar. They’re mutually funding the swear jar. Aha…mutual fund.

Of course, when most folks talk about mutual funds, they’re talking about the highly regulated investment companies they select inside their 401ks or Roth IRAs. But we’ll use the swear jar for our illustrative purposes.